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Valued at a market cap of $63.1 billion, DoorDash (DASH) operates a logistics platform connecting merchants, and consumers in the U.S. and internationally. It operates marketplaces, such as DoorDash and Wolt, that provide merchant-based services, including customer acquisition, delivery, analytics, payment processing, and more. Its DashPass and Wolt+ are membership products, and DoorDash also provides delivery fulfillment services. The company’s DoorDash storefront allows merchants to offer consumers access to e-commerce, while Bbot offers merchants digital ordering and payment solutions.
Like other marketplaces and digital platforms, DoorDash gained massive traction amid COVID-19, increasing its sales from $885 million in 2019 to $4.88 billion in 2021. While its sales growth has decelerated in recent years, its revenue has risen by 25% year over year to $9.6 billion in the last 12 months.
Despite its enviable revenue growth, DASH stock trades 40% below all-time highs and has underperformed the broader markets since its initial public offering in late 2020. The upcoming earnings report, expected after the close this Wednesday, Oct. 30, will be a key driver for DoorDash stock in the near term. So, let’s see if the food delivery giant can surpass estimates in Q3 of 2024.
What Should Investors Expect From DoorDash in Q3?
According to consensus estimates, DoorDash is forecast to grow its revenue by 22.9% year over year in the September quarter. Comparatively, the forecast calls for adjusted earnings per share (EPS) of $0.21, reversing a loss per share of $0.19 in the year-ago period.
During its last earnings call, DoorDash had projected marketplace GOV (gross order volume) between $19.4 billion and $19.8 billion, compared to estimates of $19.51 billion. Management also forecast adjusted EBITDA (earnings before interest, tax, depreciation, and amortization) between $470 million and $540 million in Q3.
In the June quarter, DoorDash reported sales of $2.63 billion, up 23% yearly, and higher than consensus estimates of $2.54 billion. While its net loss narrowed to $157 million, or $0.38 per share, from $170 million, or $0.44 per share, last year, DASH missed consensus estimates for a loss of $0.09 per share.
In Q2, total orders rose by 19% to 635 million, and marketplace GOV rose 19.6% to $19.7 billion due to higher transaction volumes and market penetration. The company reported a record adjusted EBITDA of $430 million, surpassing the high end of management guidance, indicating a focus on operational efficiency. Its gross profit margin rose by 80 basis points to 45.4%, up from 44.6% last year.
Is DoorDash Stock a Good Buy?
DoorDash is among the largest food delivery platforms globally, and has expanded into other verticals such as retail and grocery. A report from Statista estimates the food delivery market to generate an order volume of $1.2 trillion in 2024, while the grocery segment might add another $770 billion.
In the last few years, DoorDash has focused on non-restaurant retail segments, diversifying its revenue base in the process. Last year, it introduced a retail section on its mobile application, attracting more than 100,000 retailers, including Victoria’s Secret (VSCO). Earlier this year, DoorDash partnered with Ulta Beauty (ULTA), the largest beauty retailer in the U.S.
In the last four quarters, DoorDash’s GOV surpassed $73 billion, which is still minuscule given the retail segment's total addressable market. Adding categories has resulted in higher order frequencies, suggesting consumers spend on the platform when their favorite products are available.
Is DASH Stock a Good Buy?
Out of the 37 analysts covering DASH stock, the consensus is a “moderate buy," as 22 recommend “strong buy,” three recommend “moderate buy,” and 12 recommend “hold.” The average target price for DASH stock is $151.06, a slight discount to the current trading price.
DoorDash consistently reports positive free cash flow, making it a top investment right now. Its free cash flow in the last four quarters has totaled $1.87 billion, up from just $191 million in 2022. With more than $3.43 billion in cash, DoorDash has the liquidity to target expansion in international markets and gain traction in the upcoming decade.
On the date of publication, Aditya Raghunath did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
